New Twist in Armstrong Saga

By

Reed Albergotti and

Vanessa O'Connell

Updated Jan. 17, 2013 6:11 a.m. ET

The investment bank founded by Thomas Weisel, the powerful Silicon Valley financier who bankrolled and owned Lance Armstrong's former cycling team, also managed assets for the then-head of cycling's governing body, according to a broker who handled the accounts.

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ENLARGE

Thomas Weisel, left, who financed the U.S. Postal Service cycling team, rides with Lance Armstrong in Paris after his Tour de France win in 2000.
Bongarts/Getty Images

The 71-year-old Weisel is under scrutiny in the doping scandal that has engulfed Armstrong's former U.S. Postal Service cycling team.

The investment bank founded by Thomas Weisel, the powerful Silicon Valley financier who bankrolled and owned Lance Armstrong's former cycling team, also managed assets for the then-head of cycling's governing body, according to a broker who handled the accounts. WSJ's Vanessa O'Connell joins The News Hub with details. Photo: AP.

A federal whistleblower lawsuit filed in 2010 by Armstrong's former teammate, Floyd Landis, accuses Weisel—as well as Armstrong and others—of knowingly duping the Postal Service, which sponsored the cycling team he owned, by covering up doping on the team, according to people familiar with its contents.

Weisel used his fortune and his connections in business to exert influence over many facets of the sport, according to interviews with dozens of people involved in the cycling industry.

From 2001 to 2004, Thomas Weisel Partners managed some of the personal assets for Hein Verbruggen, then head of the Union Cycliste Internationale, cycling's governing body, said the broker, Jim Ochowicz, in an interview.

The UCI in October convened an independent commission to look into allegations that the UCI and Verbruggen helped cover up positive drug tests for Armstrong during the period when the former professional cyclist racked up his Tour de France wins.

"To have the head of the sport, who's responsible for enforcing anti-doping rules, in business with the owner of the team that won seven straight Tours de France in violation of those rules—it certainly stinks to high heaven, particularly now, given what's been exposed that happened under his watch," said Travis Tygart, head of the U.S. Anti-Doping Agency.

The agency accused Mr. Armstrong of masterminding a 15-year-long doping conspiracy, including while he was on the U.S. Postal Service team, and stripped Mr. Armstrong of his seven Tour de France titles. Armstrong didn't contest the charges.

Oprah Winfrey snared arguably the biggest interview of her career when Lance Armstrong came clean after spending a decade denying that he had used performance-enhancing drugs to win seven Tour de France races. Jon Friedman joins The News Hub to discuss his list of questions that had to be asked. Photo: Getty Images.

In a 2008 interview with the Journal, Verbruggen said he had never been involved in a business relationship with Ochowicz and Weisel. Reached by phone Wednesday, Verbruggen declined to comment. "It's getting ridiculous," he said when asked about the account.

Neither Weisel nor his lawyer responded to emails and phone messages Wednesday seeking comment about Verbruggen's account at Weisel's former firm. Weisel's lawyer, Robert Sacks, of Sullivan & Cromwell, told The Wall Street Journal earlier this month that he wasn't able to comment on the whistleblower lawsuit because he hadn't seen the complaint.

Ochowicz, who was hired by Thomas Weisel Partners in 2001, confirmed in an interview Wednesday that Weisel's firm managed the Verbruggen brokerage account.

"There was no hanky-panky," he said, adding that Weisel didn't have "direct access" to Verbruggen's account. He declined to say how much money was in Verbruggen's account. He added: "I have no recollection of talking about Hein's accounts with Thom Weisel."

As previously reported, the U.S. Justice Department is likely to join the whistleblower suit, according to people familiar the matter. Defendants in whistleblower actions can be held responsible for up to three times the amount of money originally doled out by the government. Because the Postal Service paid Weisel's team more than $30 million between 1996 and 2004, the potential damages in the case are roughly $100 million.

In a 2008 interview with the Journal, Weisel said of doping in the sport of cycling: "Handle the problem below the surface and keep the image of the sport clean. In the U.S. sports—baseball, basketball, football—most fans couldn't care less."

Under the leadership of Weisel, who invested large sums of his personal fortune, the United States Postal Service team became the most dominant and important team in the sport of professional bike racing.

Verbruggen's financial ties to Armstrong's inner circle began in 1999, when Verbruggen invested with Ochowicz, the former general manager of the 7-Eleven and MotorolaMSI0.50% cycling teams. Armstrong raced for the Motorola team between 1992 and 1996, when he was diagnosed with cancer. After Motorola ended its sponsorship, the team folded in 1996. Ochowicz became a stockbroker at Robert W. Baird & Co. in Milwaukee.

When Weisel offered Ochowicz a job at his investment bank, Thomas Weisel Partners, Ochowicz moved Verbruggen's account over with him, according to Ochowicz.

In 2002, Ochowicz was elected to become president of USA Cycling, the sport's national governing body. In that role, Ochowicz made occasional trips to UCI headquarters in Aigle, Switzerland. Ochowicz said he traveled to Aigle "three times in my life." Verbruggen and Ochowicz often talked about the investments with Weisel's firm, according to a person familiar with the meetings.

Timeline: A Giant's Fall

Decades of Doping

Weisel was one of the pioneers of financing for the technology and life sciences industries in Silicon Valley, serving as a lifeline to Wall Street at a time when major New York investment banks paid little mind to the sector. He co-founded one of the original West Coast boutique investment banks that catered to such companies, Robertson, Coleman, Siebel & Weisel, and broke off to form his own firm, Montgomery Securities, in 1978.

Montgomery was a top underwriter and adviser to hundreds of high-growth companies, including Amgen Inc.,AMGN2.85%E*Trade Group Inc.ETFC-0.77% and Nextel Communications, and helped guide the initial public offering of Web search engine YahooYHOO-2.00% in 1996. Montgomery was sold to NationsBankBAC-1.38% for $1.3 billion in 1997, which itself morphed into Bank of America Corp. after a merger the following year.

Weisel subsequently left to form Thomas Weisel Partners in 1999. The firm catered to the same high-growth sectors as Montgomery but found itself with more competition for technology underwriting business and ultimately a severe downturn in investor demand for such stocks.

Though private financing deals once valued the firm at $2 billion, it was ultimately sold to Stifel Nicholas & Co. for less than $200 million. Weisel is now a co-chairman of Stifel.

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